How to Understand the Long-Term Return of Your Supporters

6 min

Posted August 13th, 2018

This post is written by Michael Jalkio, a data engineer on Classy’s data team and expounds upon a section of our latest report, The State of Modern Philanthropy.

Individuals can support your organization a number of ways. For example, on the Classy platform, supporters can:

Make a donation

Start a monthly recurring donation

Become a fundraiser

Register to attend an event

Share a campaign on social media

Though all of these actions can be considered beneficial, the financial return they create for your organization differs. In this blog post, we’ll explore the lifetime financial return from three of these actions: donations, recurring donations, and fundraising, to understand what actions can maximize ROI as you build your supporter base [1].

What is a Supporter’s Financial Return?

Financial return is simply the total dollar value that a supporter brings in to your organization, either through direct payments (e.g. donations, tickets) or by making appeals on your behalf that lead to others making direct payments.

This question, “what is a supporter’s financial return?” is fairly tricky to answer because donations differ greatly in their sizes, frequency, and seasonality, so we can’t expect a single summary statistic to tell us everything. For example, on the Classy platform the average lifetime return (in dollars donated) for a donor is $158, and the average number of donations is 1.5 [2]. But these averages do not represent what is typical; the median lifetime return is $50, and the median number of donations is 1.

The discrepancy occurs due to the nature of the data’s distribution. Donation size and number of donations have “long tailed” distributions. To learn more about this discrepancy read our post on Mean Vs. Median.

This general long-tailed pattern of giving is important to be aware of. While the majority of supporters give a single donation of $50 or less, a smaller number of donors give much higher amounts and/or many more times. While 95 percent of donors on Classy have given three times or less, the remaining 5 percent of donors have contributed 30 percent of our total transactions.

The distribution of donation volume is very similar, and even follows a well-known pattern of long-tailed distributions called the 80/20 rule (or Pareto principle). The idea is that typically, 20 percent of a company’s customers will provide 80 percent of their revenue. Here, we see that the top 20 percent of donors on Classy (those who have given $100 or more) provide approximately 75 percent of the total donation volume on the platform.

Donation volume on Classy (almost) follows the 80/20 rule. The top donors provide the majority of the financial return on the platform.

These distributions raise an important question. Should nonprofit professionals only focus on this top 20 percent of donors? While there is power in nurturing high-value relationships, we strongly believe that the answer is “no.” Nonprofits need to cultivate many types of donor for long-term success. Every donor relationship is an opportunity that can be grown.

The Financial Return for Recurring Givers

On Classy, recurring donors agree to make monthly donations to the organization that they support. We call these agreements recurring donation plans. At first, these monthly donations look small compared to one-time donations. The average recurring donation is $37 (compare to an average one-time donation of $118), and the median is $25 (compare to an median one-time donation of $50).

The power in recurring donations, on the other hand, is in their long-term return. The outcome of a single recurring donation plan is hard to predict; the donor might cancel their plan after a few months, or they could continue to donate for years. Which of these is the more likely outcome? Historical data from thousands of recurring donation plans on the Classy platform allows us to answer this question. Using a statistical technique called survival analysis, we calculated the likelihood of a recurring donor continuing their plan after a certain number of months.

The above survival function for recurring donation plans shows the likelihood of a recurring donor continuing to give monthly over time.

Our data shows that over 75 percent of recurring donors continue their plan in the first six months and a significant number of donors continue to give monthly for years (the longest running recurring donation plans on the Classy platform have been active for over 6.5 years!—essentially since our platform’s conception).

Based on our analysis, a $25 recurring donation (the median reported earlier) is expected to provide equal financial return over three years as a one-time donation of $485. And the recurring donation has a 26 percent chance to continue providing financial return past that three year horizon! The average recurring donation of $38 is worth even more, $718 over three years. The lifetime return from both these recurring donation plans is more than five times higher than the return from a typical donor.

High Financial Return Supporters

Beyond the huge financial return from the recurring plan, these same supporters often provide financial value through additional actions. Donors with recurring donation plans are 77 percent more likely to make an additional one-time gift within a year, when compared to donors without recurring donation plans. This suggests that when a supporter chooses to be a recurring donor, it does not reduce their chances of giving one-time donations. We also find that having a recurring donation plan does not reduce the size of one-time gifts, their distributions look identical. In fact, the median one-time donation size is $50 for donors with and without recurring donation plans, and the average one-time donation size is higher for donors with recurring plans ($150 versus $113).

The Financial Return of Fundraisers

The final type of supporter we want to briefly mention is the fundraiser. Again we find that the financial return from a fundraiser is much higher than the return from a typical donor. The median donation volume a fundraiser brings in is $146, and the average is $559.

Fundraisers reach out to their networks and bring in new supporters. The median number of donations a fundraiser brings in is three, and the average is 7.4. When a fundraiser attracts a first-time donor, we find that 9.7 percent of these donors will return to give again within the year. Some of these new donors could be very valuable, and you wouldn’t have reached them without the help of the fundraiser.

In these graphs we summarize the above information visually by showcasing the lifetime donation volumes of one-time donors that have never created a recurring donation plan, recurring donors, and fundraisers. The average lifetime return of each group is indicated by the vertical line present in each graph [3].

As you can see, the three graphs depict the distributions of lifetime financial return for different types of supporter on Classy. Expected values for recurring plans that are still active are included in the recurring donor graph. Each graph is also truncated for readability, only showing supporters with lifetime returns of $2,000 or less.

Key Financial Return Takeaways

Cultivate a variety of supporters to reap long-term benefits and consider how the 80/20 rule affects your organization.

Recurring donations add up. Even if an initial recurring donation is small, you’ll see a huge return in the future.

Recurring donation plans appear to be additive. We don’t see evidence that they reduce the chance that someone will give a one-time donation.

Fundraisers bring in donation volume beyond what they’d give as a donor, and do so through new supporters you wouldn’t have access to otherwise.

The lifetime financial return for each type of supporter is different, and you should consider the tradeoffs between upfront and lifetime return when planning your campaigns.

[1] A supporter relationship is between an individual and an organization. If an individual gives to two different organizations on Classy, this would be counted as two different supporters.

[2] For all analyses, we’ll use data from January 1, 2014 through September 2017.

[3] The average lifetime return for the recurring donor is slightly different from the expected value calculated using our survival analysis. This distribution contains true values for canceled plans and expected values for active plans.